Never Use Cash Advance from Your Credit Card
Unless you're utterly desperate for cash, I would advise everyone to stay away from this feature.
I get it, taking cash from your credit card can be extremely convenient. Credit cards are becoming accepted wherever you go, but sometimes we still need to pay by cash.
I find that, in North America, we can generally get away with buying everything on credit card. Fewer smaller businesses are cash only. They realize the convenience of the card.
Regardless, there will always be that small business that's adamant about cash payment. They're always a pain in the butt. I sometimes avoid making the purchases altogether if that's the case, but there's sometimes a great deal that you can't say no to.
Nowadays we want to travel as light as possible, so a lot of us don't carry cash with us. We generally carry the credit card for payments, our phones (the future of payments), and our keys (hopefully this'll soon be absorbed by a phone app).
This makes the cash advance way more enticing, but I've always heard that taking a cash advance from my credit card was a bad thing. So for years, I've never done it.
That is, until I took a trip to Turkey last summer. I used up all my Turkish Lira and I was in desperate need of some cash. I had no option left but to take a cash advance from the ATM from my Mastercard.
At the time, I wasn't thinking much of my Mastercard because I was on vacation; and, like an idiot on vacation, I was only thinking of the moment, not of the future.
Fast forward twi months, and I'm still receiving cash advance interest on my credit card. I was like, "How the heck is this interest still hitting my credit card?" I pay my credit card in full quite frequently and pay attention to everything in my statement.
I called into the Mastercard to see what was up. They told me that the policy for cash advances is that there is no interest-free waiver if you pay your Mastercard in full. They will continue charging interest on your credit card! What?!
I thought they were kidding until I saw the policy. The amount of interest you have to pay for the cash advance is also based on your overall spending rather than the actual cash advance that you took out! How does that make sense? When I asked this question to the representative, they simply said it doesn't. It's just the policy, they can't do anything about it.
I was okay with paying off the fee and the interest for the first month, but why the second month? It dawned on me that they were giving themselves a 30 day period in which they charged me interest. Since I had done the cash advance in the middle of June, the interest period wouldn't end until the middle of July. This means that they would continue to have to charge me interest for at least two statements.
Is this highway robbery? I would say yes and no. Yes because it's an unfair way of making extra cash from their clients, but no because we're all dumb enough to sign the paper to say that we accept the rules and conditions of the credit card.
So, if there's anything I would warn anyone of, it's not to take a cash advance from your credit card. I put an extra emphasis for those that have credit card debt. If you can't get out of your debt, a cash advance will put you at an even greater disadvantage because the interest they were charging me was 22%. That's just ridiculous, so be warned!